Minister for Finance Paschal Donohoe announced the expansion of the tax debt warehousing scheme in the Budget. The Collector General’s Division has provided the following update:
I refer to your representations at TALC regarding the section 997A Taxes Consolidation Act 1997 (TCA) issues impacting certain directors / employees who have a “material interest” in the company that pay their emoluments, and who are not entitled to a credit for the tax deducted from their remuneration under the PAYE system but not remitted to Revenue, as a consequence of their employer company availing of debt warehousing for PAYE (Employer) liabilities.
In yesterday’s Budget publication, the Department of Finance has outlined the intention to allow self-assessed income taxpayers with employment income who have a material interest in their employer company to warehouse income tax liabilities relating to their Schedule E income in these circumstances. Please note this is subject to the enactment of the Finance Bill.
In this regard,
- where a director / employee has a “material interest” in the company that pays their emoluments, and
-
section 997A TCA means the director / employee is not entitled to a credit for the tax deducted due to the company warehousing its PAYE (Employer) liabilities, and
-
the director/employee does not satisfy the 25% reduction of income threshold to avail of income tax debt warehousing,
the director / employee may avail of debt warehousing only for their Schedule E (PAYE) liability which has been warehoused by the employer company. The non Schedule E liability must be paid when filing the income tax return.
Revenue has updated the Statement of Net Liabilities screen to include a new tick box declaration (as outlined below). When completing the Statement of Net Liabilities screen, a director / employee who satisfies the above requirements and wishes to warehouse their Schedule E liability only, may tick the relevant declaration to avail of debt warehousing for their Schedule E liability.
Although my income has not reduced by 25% when compared to 2019, I wish to warehouse my Schedule E (PAYE) liability in respect of the tax deducted from director emoluments as set out in this return on the basis that I am restricted by Section 997A TCA 1997 from claiming credit for tax deducted from those emoluments as a result of my employer company warehousing their PAYE (Employer) liabilities. We would be grateful if you could bring this to the attention of your members so that they can inform their clients who are impacted by this issue. END OF MESSAGE.
As highlighted in the http://www.ccab-i.ie/submissions.html , the interaction of anti-tax avoidance provisions under section 997A TCA 1997 and the tax debt warehousing scheme gives rise to financial difficulties for taxpayers classed as proprietary directors and employees with a material interest in their employer company because this cohort of taxpayer are not entitled to a credit for PAYE tax in the calculation of their income tax liability for 2020 and preliminary tax liability for 2021 where their employer is participating in the tax debt warehousing scheme. CCAB-I has made representations to Revenue for a pragmatic solution to this issue.
CCAB-I has asked Revenue for clarification on a number of issues related to the expanded debt warehousing scheme and further information will be published when it becomes available.